Part 3: Applying the percentage of completion model

For many entities, accounting for revenue can be complex as every revenue stream, sales contract, and transaction can be unique. This additional guidance, now included in Section 3400 Revenue (in Part II of the CPA Canada Handbook – Accounting), eliminates room for interpretation in many areas; however, professional judgment will still be required. 

In Part 3 of this three-part series, we provide further guidance on applying the percentage of completion model. At a high level, we’ll discuss what an entity should consider in each step of the process when applying this method. The other publications in this series address the following topics: 

• Part 1: Five-step revenue recognition assessment model; and
• Part 2: Determining the appropriate manner and timing of revenue recognition  

In this series, we explain some of the additional guidance included in Section 3400 and provide practical insights to help financial statement preparers and users evaluate the impact of these changes on an entity’s financial statements.   

Practitioners are encouraged to read this series of publications in order and alongside Section 3400 to fully understand the requirements, as accounting for revenue contains many nuances. As entities prepare their financial statements under amended Section 3400, it’s important to also take note of CPA Canada’s publication, “ASPE briefing: Additional guidance added to Section 3400 Revenue”, which provides: 

• detailed guidance on each of the areas of revenue recognition impacted by the amendments; 
• application guidance for not-for-profit organizations; 
• additional resources; and 
• comprehensive illustrative examples 

For further background on the Accounting Standards Board’s 2019 amendments to Section 3400, click here.  

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ASPE and ASNPO: How changes to Section 3400 Revenue could affect your financial statements

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